When an NRI sells a house, how is the tax calculated, know in detail

If a Non Registered Indian (NRI) sells his property here, then let's try to know about what are the rules regarding tax. The capital gains you make on selling the house are taxable. Capital gains can be of short term or long term (STCG/LTCG). It depends on the holding period. If the house is sold within two years of purchase, it is called short term capital gain. If sold after 2 years, it is called long term capital gain.

Coming to Section 54EC, the amount of capital gains can also be tax-saving by investing in certain types of bonds. The bond can be redeemed after five years of purchase.

Apr 25, 2022 | 6:56 am

If a Non Registered Indian (NRI) sells his property here, then let’s try to know about what are the rules regarding tax. The capital gains you make on selling the house are taxable. Capital gains can be of short term or long term (STCG/LTCG). It depends on the holding period. If the house is sold within two years of purchase, it is called short term capital gain. If sold after 2 years, it is called long term capital gain.

Talking about the tax on capital gains, for the long term, this rate is 20 percent. The short term gain will be added to the total income of the NRI and tax will have to be paid according to the tax slab in which it falls. As per the rules, when an NRI sells a property, the buyer has to deduct 20 per cent TDS. If the property is sold before 2 years, the buyer will have to deduct TDS of 30 per cent.

Non-resident Indians can avail exemption on long term capital gains under section 54EC. Under section 54, if an NRI earns capital gain from the sale of a property, he can save tax by investing the capital gain portion. The new property can be bought one year before or two years after the sale. If the house is being built, then the construction work should be completed within 3 years.

Coming to Section 54EC, the amount of capital gains can also be tax-saving by investing in certain types of bonds. This tax saving bond is issued by the National Highway Authority of India or Rural Electrification Corporation.

The bond can be redeemed after five years of purchase. With the help of this bond, NRIs can ask the buyers not to deduct TDS. A maximum of Rs 50 lakh can be deposited in such bonds in a financial year.

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